Sizing Up Broadcasting’s New World Order

By my labored calculations, FCC Chairman Ajit Pai's plan to restore the UHF discount would allow 10 of the 11 largest station groups to reach more than 60% of U.S. TV homes if they are so inclined. In fact, Ion already has. The exception is Tegna, which would be capped at 56.7%.

Yesterday, FCC Chairman Ajit Pai declared that the agency would restore the UHF discount to the national TV ownership cap at its April 20 meeting. The action would reverse the FCC’s decision just last fall to eliminate the discount. It’s time “to hit the reset button,” Pai said on his blog.

In keeping with the FCC’s new practice, Pai released a 15-page draft of the order that would effectuate the change. It includes a lot of regulatory history about the cap and rehashes some of the arguments for and against restating the discount before concluding it has to go.

What Pai’s blog and draft don’t include is any discussion about what the real-world effect of hitting that reset button might be.

So, I am here the help. Check out this chart that I put together at 4 a.m. this morning (I kid you not) using basic coverage data from BIA/Kelsey.

The numbers on the chart are all percentage except the last two columns.

Owner Actual coverage FCC coverage  Headroom under 39% with discount Minimum  actual cap  Maximum  actual cap No. of markets No. of stations
Ion Media 64.8% 32.4% 6.6% 71.4% 78.0% 56 62
Univision 44.1 23.2 15.8 59.9 75.8 25 59
Tribune Media 43.7 26.7 12.3 56.0 68.3 34 54
Nexstar Media 39.2 26.1 12.9 52.1 65.0 100 171
Sinclair Broadcast 38.6 24.3 14.7 53.3 68.0 83 169
CBS 37.7 24.6 14.4 52.1 66.5 18 30
Fox 36.8 24.3 14.7 51.4 66.1 17 29
NBC/Telemundo 36.1 19.4 19.6 55.8 75.4 20 28
Tegna 31.3 26.3 12.7 44.0 56.7 39 55
ABC 22.4 20.7 18.3 40.8 59.1 8 8
Hearst Television 18.7 13.2 25.8 44.5 70.3 27 34
EW Scripps 18.1 11.4 27.6 45.7 73.4 24 36
Raycom Media 15.5 10.7 28.3 43.8 72.1 43 73
Entravision 13.9 7.1 31.9 45.8 77.7 24 58
Liberman 11.2 5.6 33.4 44.6 78.0 10 10
Cox Media 11.1 5.9 33.1 44.3 77.4 11 15
Meredith 10.7 6.9 32.1 42.9 75.0 12 28
Gray Television 10.3 7.6 31.4 41.8 73.2 56 131
Graham Holdings 6.6 3.7 35.3 41.9 77.2 6 7

The chart lists the top 20 commercial station groups ranked by their “actual coverage” of the 118.4 million TV homes. You see that Ion currently tops the list at 64.8% and Graham brings up the rear at just 6.6%.


At this moment, the actual coverage is also the coverage for purposes of the FCC ownership rule (39% of TV homes) since there is no discounting for UHF stations. Note that Ion, Univision, Tribune and Nexstar now exceed the cap and that Sinclair, CBS, Fox and NBC/Telemundo are close to it.

(The draft dismisses as moot a petition that seeks to grandfather the groups that now exceed the 39% cap.)

The second column (“FCC coverage”) shows the reach of groups if the FCC goes ahead and restores the UHF discount, which counts only half the coverage of UHF stations. The percentages are considerably lower with no group near the 39%.

The third column shows how much headroom the groups have under the cap if the discount is restored.

So, the question becomes how big can each of the groups get with the discount.

That will depend in large part on whether the expanding station groups buy VHF stations, whose coverage is fully counted, or UHF stations whose coverage is discounted by half.

What I’ve done is calculate the reach for each of the groups, assuming that they buy only fully counted VHF stations (minimum cap) and assuming they buy only discounted UHF stations (maximum cap).

Here’s how I did it using Sinclair as an example.

Sinclair’s actual coverage is 38.6%, but with the restored discount, its coverage for purposes of the FCC cap is 24.3%. That leaves it with 14.7% of headroom under the FCC cap. So, if it buys only VHF stations, it could expand its reach by 14.7% (39% minus 24.3%).

If you add the 14.7% to its actual coverage of 38.6%, you get 53.6%. That’s what I will call its new “minimum actual cap.” That’s as big as Sinclair can get if buys all VHF.

But what if Sinclair buys only UHF? Because UHF coverage is discounted, that would double the coverage Sinclair could amass to 29.4%. Add 29.4% to its current actual coverage of 38.6% and you get 68%. That’s its “maximum actual cap.”

So, you see, for each group you get a range. For CBS, its cap will be between 52.1% and 66.5%. For Nexstar, it will be between 52.1% and 65%.

Ion owns only UHF stations today. If it buys only UHF going forward, it could reach the theoretically maximum allowed coverage of 78%, double the nominal cap of 39%.

The chart is terribly misleading in one respect.

All the groups cannot grow to the levels indicated on the chart. It’s a bit of a zero sum game.

There are only so many stations per market and only so many major markets, which is where the big chunks of coverage are. Only those groups with major market stations today or those that aggressively pursue the available major market stations now available (Tribune, for instance) will have to worry about bumping up against the caps once the UHF discount is restored.

I think the significance of the chart is that it clearly shows that 10 of the top 11 groups could all easily exceed 60% if they were so inclined. In fact, Ion already does.The exception is Tegna, which is capped at 56.7%. It’s weighed down by too many VHF stations in its current portfolio and, besides, I don’t think it will outbid Sinclair for Tribune’s stations, the easiest way to bulk up.

The other point that needs to be made: If the FCC restores the discount (and if it is not reversed by the courts), the industry will consolidate rapidly. Some groups will grow; some will disappear.

On his blog, Pai says that after restoring the discount he will open a rulemaking to take a “comprehensive” look at the ownership rule, suggesting that the FCC will seek a new cap based on a reasonable and thorough assessment of the TV ecosystem and broadcasting’s place in it.

This is nonsense and I suspect he knows it.

By the time that rulemaking is completed, the game will be over. The industry will have contracted. And what America business has joined together, no Republican regulator will put asunder.

Interestingly, NAB is a party to the fiction. As it argues for restoration of the cap, it has been telling the FCC that it has “no position on whether the commission should modify, maintain or eliminate” the 39% cap.

If it supports the return of the UHF discount, it has a position. And it’s that all the big groups should be permitted to get much bigger (see chart). The position reflects the thinking of the groups that dominant its TV board.

If Congress and the FCC ever get around to setting a new hard cap on ownership, I’m betting it will be one-tenth of a percentage point higher than the coverage of the largest group on the day the law/rule is adopted.

This is way too much math for a dreary day in New Jersey.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here. You can read earlier columns here

Comments (11)

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Shenee Howard says:

March 31, 2017 at 6:11 pm

Someone please explain, with the switch to digital broadcasting, and, wide distribution of broadcasters by MPVDs, why in 2017 a UHF discount is needed other than greed and desire to control the message?

    Brad Dann says:

    March 31, 2017 at 7:07 pm

    For all those asking essentially this question. You are correct that there is no logic for restoring the discount for its original purpose (UHF is now a stronger signal than VHF; with the Discount originally meaning to account for the weakness of UHF signal coverage). There is the fact that business models were built with the cap in place, deals were approved by the FCC and financial transactions were made predicated on the rules that were in place at the time.

    Teri Green says:

    April 1, 2017 at 12:08 am

    Unless the new digital standard makes VHF better there is no actual reason to..

Brad Dann says:

March 31, 2017 at 7:15 pm

Harry, I disagree that the restoring of the discount is the end game. It’s simply the easiest move to start to give the industry regulatory relief. An actual review on of other ownership regulations (which the FCC was supposed to conduct every 4 years in good faith and has failed to do) could eliminate the 8 Voices Test which restricts companies interested in smaller markets (Gray, Quincy: to name a couple) from getting stronger in their own markets. The no common ownership of Big 4 affiliates also hurts the quality of service in smaller markets, where not all Big 4 affiliates are competitive or healthy. I think just about all companies would rather get stronger in the markets they’re already in than blindly charge into new markets (they’ll do it if that’s all they’re allowed to do, but I doubt it’s the preference). It’s extremely possible under Mr Pai that those changes or waivers to those rules will happen. Finally, while the FCC can determine how to interpret the 39% Cap, ONLY CONGRESS can CHANGE the NUMBER. It’s a law folks and the FCC can not change the 39% number on it’s own.

Brad Dann says:

March 31, 2017 at 7:23 pm

Also, for all those worried about MARKET DOMINATION by these evil capitalist companies, the Dept of Justice is NOT considering changing it’s standards about what it will allow in an individual market (the rough current standard is no entity can control more that 40% of TV revenue in a single market). I may set off new rumors about Sinclair trying to buy off the Attorney General by pointing this out. There are no discussions that ANYBODY has suggested the DOJ is changing or needs to change. So, as Aaron Rodgers told Packer fans a couple years ago R-E-L-A-X.

Teri Green says:

April 1, 2017 at 12:08 am

You logic doesn’t hold up. Suppose there are five stations, I can buy one station put ABC on the main signal and CBS, FOX and NBC on the subchannels. I only own one station out of the five, but I control four networks. I effectively own the market.

Cheryl Thorne says:

April 1, 2017 at 11:05 am

These broadcasters…They can try to do all the y want to own the market..but remember they do not control the development of content as the O and O’s do..That is what you are all missing….Control of the development of content and have the reach of distribution like the o and o’s do and you can control your fate..Local news is dying and if these companies like Nexstar and Sinclair think they will make a difference by controlling the distribution they might as well sell today!! The Netowrks have the leverage..they control the meaningful content and thats all the consumers care about!!!

    Jayson Siler says:

    April 2, 2017 at 9:15 am

    A very astute observation re networks having leverage because of content. And those same networks are embracing additional distribution platforms to extend their reach and amortize the costs of production and content acquisition. And there’s basically nothing significant that station groups can do to stop them!

Brad Dann says:

April 1, 2017 at 11:07 am

The DOJ won’t let you control, alone or even through sidecar companies, more than 40% of revenue in the market. They’d sue to block the transfer/consummation of any affiliation agreement that would enable you to exceed this. Maybe they’d make an exception in a TINY market where there are no other facilities, but we’re talking North Platte, Alpena, etc.. Also, there’s no technology that would allow you to broadcast 4 signals in HD, NBC and CBS are 1080i, ABC and Fox are 720p and Fox still requires affiliates to use their splicer which precludes any other HD signal on their main spectrum. So actually you’re logic has no basis in reality.

Nate Mann says:

April 2, 2017 at 10:19 pm

The chart is a MESS on mobile. An unreadable mess. It’s 2017… get with the program folks.

Cheryl Thorne says:

April 3, 2017 at 9:08 pm

Mr Federal Guy..I do not think by the time this occurs the DOJ will be concerned with any station having a 40% share of the market revenue. They need to do this and change it to % of Market revenue (all media) because the way this is going the TV revenue will be down to 15% of the total spending in any market..As for the technology it
s interesting how they will figure that out when your survival depends on it